Tag Archives: cryptocurrencies

Reality Check: What Venezuela’s National Crypto Means for Decentralization

President Trump recently announced a ban on Venezuela’s new national cryptocurrency, the petro.

That’s right—Venezuela created its own national crypto, possibly to circumvent U.S. sanctions.

But could the petro do more than that, and actually catalyze government-controlled cryptos around the world?

This is a Reality Check you won’t get anywhere else.

President Trump signed an executive order March 21 banning all transactions involving digital currency issued by the Venezuelan government, after it began pre-selling its own cryptocurrency, the petro, in February.

The petro differs from other cryptos because, according to the Brookings Institute, “The price of one petro is pegged to the price of one barrel of Venezuelan oil…” and “the petro/bolivar exchange rate … includes a discount factor determined by the Venezuelan government.”

By making that distinction, the Venezuelan government is now responsible for managing multiple currency systems simultaneously, creating what Dash Force News Editor Joël Valenzuela described as “an accounting nightmare.”

But isn’t cryptocurrency supposed to make accounting for transactions easier?

Well, actually it’s not the cryptos but the tech they’re built on. A few episodes back, we discussed how cryptocurrency is backed by radical transparency due to the power of the blockchain.


Rather than being backed by radical transparency and being a “trustless system”, as Valenzuela called it, the petro is essentially “fiat crypto.”

“When you back it with something that doesn’t have transparency, you have to trust the party that is providing the assets that back the coin,” according to Valenzuela. “It ruins its original value proposition.”

So why would Venezuela create the petro in the first place?

Once a crypto is a national currency, it’s subject to many tariff barriers and, in some cases, sanctions. Which is why President Trump made the first major national decision by the U.S. to ban a cryptocurrency. But cryptos like Dash aren’t tied to a government and weren’t created to bypass sanctions.

Once the richest nation in Latin America, Venezuela had suffered wild inflation, plummeting the standard of living and causing uproar from poverty stricken citizens. Many Venezuelans facing economic hardship are putting pressure on the government to stop the bleeding.

Anything to ease their suffering in the short term will be a boon to the tyrants, according to Valenzuela. But because the petro is not truly backed by trustlessness, critics say the government crypto won’t last long. And that presents a challenge to other governments considering creating their own cryptos.

Russian President Vladimir Putin already announced his government will issue its own CryptoRuble, likely sometime in mid-2019, according to CoinTelegraph.

The CryptoRuble is supposed to be directly tied to the ruble, issued by the Russian government and could not be mined.

More governments are likely to investigate the benefits of state controlled blockchain technology.

But remember, the two major selling points of blockchain are radical transparency and decentralization, meaning no one can manipulate the supply or the transactions.

And it’s those two aspects of blockchain that governments aren’t fans of.

Recently Congressman Brad Sherman of California read a statement that called cryptocurrencies “harmful,” and appeared to accidentally admit that cryptocurrency reduces government control of our currency. He said, “It hurts the U.S. government in two ways. Our contr… …our ability to have the US dollar be the chief means of international finance is what has underpinned our ability to impose sanctions…”

So Sherman doesn’t like the lack of “contr…” that the government has over crypto.
But on the other hand, imagine if the U.S. decided to use blockchain to track how our tax dollars are spent. Remember when the Pentagon admitted earlier this year that it couldn’t account for hundreds of millions of dollars?

What could help prevent data loss like this? The blockchain.

Corporations are already testing out the tech to prevent major data breaches like what happened to Target, Home Depot, JP Morgan, Anthem and others.

John Oliver explained the power of the blockchain in a recent episode of his show “Last Week Tonight.” He said, “The blockchain… a database that is nearly impossible to hack or tamper with, and which could possibly improve security, efficiency and trust. That is why big companies like Wal-Mart, IBM and JP Morgan have all been experimenting with blockchain as a way to potentially share and secure data transactions in a reliable, easy to access way.”

So what you need to know is that the blockchain presents an opportunity for governments to create a more transparent financial system. But Venezuela isn’t really doing that with the petro.

The crypto market has and will continue to fluctuate. Some crypto will disappear, some will stick around.

The question is, who is going to control the crypto? If governments do… they will take away the freedom of crypto… but if crypto currencies remain decentralized, then we will be able to keep a radically transparent financial system for the people.

That’s Reality Check. Let’s talk about that, right now, on Twitter and Facebook.

Valenzuela: What Bitcoin’s Civil War Taught Me About Media Manipulation on Both Sides

(Dash Force News) I used to think that Bitcoin’s scaling drama would be over after the split to Bitcoin Cash. I also thought that those promoting Bitcoin’s use as a peer-to-peer currency were the “good guys” of the two sides. I was wrong on both counts.

Last week I noticed an article about Portsmouth, a nearby town I know very well, by Bitcoin.com. The article touted a local shop as “Bitcoin-only,” and mentioned the dozens of local shops that accepted it as payment. The problem is, the shop itself accepts a variety of cryptocurrencies, especially Dash, and even stopped accepting Bitcoin for a while, and the local businesses receive over 80% of their cryptocurrency sales in Dash. The article, however, mentioned Dash not once, despite embedding the video of my CNN appearance where I’m highlighted spending only Dash all over town. After I complained, the word “only” from “Bitcoin only” was removed from the headline, and the video, the single strongest piece of news about the article’s central subject, was removed entirely. Anything to avoid mentioning Dash at all.

The experience taught me an ugly lesson about the communities behind two of the largest cryptocurrencies in the world.

There’s an “ends justify the means” approach to truth-bending

Both Bitcoin and Bitcoin Cash’s communities are out to push one narrative: their coin is the one that’s being used everywhere, and will win mass adoption. Granted, just about every coin under the sun is looking for the same outcome for their project, however most understand that this is not yet the case, that we all have a long ways to go before wide adoption is achieved, or one coin is crowned undisputed king. The difference is, both Bitcoins want to force the narrative today that their coin has already won wide adoption, facts be damned, and are willing to go to crazy lengths to manipulate the narrative to fit that conclusion. Because of that, I’d call both Bitcoin communities more dishonest than those of most other coins.

The fight isn’t over the best tech, but the “one true Bitcoin”

Bitcoin grew on its own merits as a peer-to-peer electronic cash system that anyone could use anywhere and no one could censor or stop. Now, however, the struggle isn’t between which is better, but which is the real Bitcoin. This is a narrative struggle that only members of the two crypto cults really care about. The rest of the world doesn’t care for this holy war over a sacred title, it cares about the best technology that can enable the creation of wealth and free the world. That used to be Bitcoin, but it isn’t anymore, and the more people focus on making something “more Bitcoin” instead of better, the more it’ll fall behind in actual usefulness.

The narrative completely leaves out cryptocurrency advancements over the past few years

Bitcoin pursues complicated and experimental scaling solutions that will allow it to be efficiently used for smaller transactions as it was before, under the hubris of assuming everyone will use it instead of another more useful coin simply “because it’s Bitcoin.” There’s a similar frustrating attitude with Bitcoin Cash, with tough talk about experimenting with different double-spend solutions and considering developments to improve privacy. Dash already solved both those, four years ago. This attitude of ignorance about present-day tech and the advancements in the rest of the cryptospace presents an acute competitive disadvantage, with other projects able to sneak up and out-compete the two blinded projects.

Ultimately, neither Bitcoin nor Bitcoin Cash will win out

Then it hit me: neither Bitcoin nor Bitcoin Cash will be the cryptocurrency that wins out in the end. When you’re fighting over which is the true Bitcoin rather than which benefits humanity, when you ignore the rapidly developing technology in the space in favor of years-old tech, when you curate a media narrative that presents a false picture of the present state of cryptocurrency adoption and deliberately block out information that would run counter to that narrative, you will lose. Both projects had the opportunity to create something special that the whole world uses. They have instead opted to engage in a holy war. They have their reward.

Tim Draper Predicts Upward Trend for Cryptocurrency

(Dash Force News) Tim Draper, the famed investor who once said “the world needs this new kind of currency”, now predicts Bitcoin will reach $250,000 USD by 2022.

Draper unveiled his prediction at his blockchain party and via tweet, even though he mistakenly proclaimed $25K in his first tweet, which was later clarified to be $250K. He even emboldened his prediction in a giant sign displaying “Tim Draper predicts Bitcoin @ 250K by 2022” outside his entrepreneurship program, Draper University. Draper did not expand on his prediction methodology.

Draper, who founded the venture capital firm, Draper Fisher Jurvetson, and also lead successful investments in Skype, Tesla, Twitter, and SpaceX has said that he was attracted to currency not tied to a government, “[s]o when Bitcoin showed up, I was all over it”. Draper is known to have purchased $30,000 in Bitcoin from the U.S. government during their liquidation of confiscated funds from Silk Road.

Price predictions are difficult

Making correct price predictions are already very hard in traditional markets where information is plentiful, but price predictions become vastly more difficult with cryptocurrencies because of the increased possibilities, less behavioral information, and greater assumptions. For example, Murray Stahl of Horizon Kinetics hypothesizes that Bitcoin is worth the sum of all the other currencies in the world – $361,000 USD per Bitcoin. However, this relies on the assumptions that Bitcoin, and no altcoins, will be used by most people in the world and also discounts future monetary policies and economic growth. A correct, or even for that matter a somewhat close-to-correct, price prediction for cryptocurrencies requires an unfathomable calculation of infinite information and knowledge of future actions of individuals and governments. A way to cope with the impossibility of making full-proof price predictions is to instead focus on the economic ordinal direction, rather than economic cardinal magnitude, of price movements over time. An investment analyst will also look at historical movements and decide if an asset or currency will continue along that trend, upwards or downwards, into the future.

A quick way to filter out the noise that surrounds cryptocurrencies’ rapid price movements is to look at the price of Bitcoin, Dash, and other cryptocurrencies in a log scale rather than a liner scale, which focuses on the percent change and is better adept for cryptocurrencies. When this technique is implemented, taking Bitcoin and Dash as examples, both reveal that they have generally been trending upwards over the past few years. There are exceptions in the time series, during small slumps, but the coins have mostly trended upwards and appreciated relative to the USD. However, to aid a price analysis beyond simple extrapolation, which is prone to fallacies and errors, is to focus on the value an item provides to consumers and the potential value it could provide in the future.

Value is derived from services provided to consumers

As people discover the value of a good/service, they will demand more of it and thus increase the price unless met with extra supply. Since most cryptocurrencies have a limit to the amount of coins mined, the way for the price to increase is to increase the coin’s value to users. Dash has been focusing on how to provide value to users the past couple years and has laid out guidelines on how it plans to continuously improve services for users in the future.

In the immediate case, Dash, with its low transaction fees and fast transaction times, has allowed people around the world to use Dash as currency in exchange for goods and services. The citizens of Venezuela have quickly adopted Dash to escape their horrible inflation, but use cases are not limited to hyper-inflationary countries. On the Discover Dash website, current and potential Dash users can locate numerous online businesses and local physical shops all over the world that take Dash. This usability of Dash, in addition to its full cryptocurrency offerings of sound money, security, and privacy demonstrates its value offerings and thus makes Dash one of the better positioned currencies for future economic ordinal price appreciation relative to other currencies.


Written by: Justin Szilard

Bank of America Stops Lending to Several Gun Manufacturers, Strengthening Case for Crypto

(Dash Force News) Bank of America will cease providing lending services to companies manufacturing certain types of firearms.

As reported by Bloomberg, Bank of America, the second-largest bank in the US, will no longer lend to firearms manufacturers involved in selling semi-automatic rifles deemed “military-style” to the civilian populace. This comes after a wave of pressure on banks and payment providers to restrict their services provided to firearms manufacturers in the wake of recent highly-publicized shootings. Increasing financial pressure could cause manufacturers to cease production of controversial items or risk harm to their business.

Centralized payment systems have a long history of shutting out controversial projects

Payment companies and the banking industry, with centralized control over services, have long posed problems for businesses and causes that have attracted controversy over the years. PayPal froze the accounts of supporters of the Bundy Ranch, an agricultural community in the US which was engaged in a dispute with the federal government resulting in an armed standoff. Wikileaks famously also had all its payment providers shut down due to is exposure of government corruption, prompting them to seek cryptocurrency as a way to get around the ban.

Dash is making strong inroads in censored industries like marijuana and alternative media

As the top cryptocurrency for payments, Dash is focused on offering better and censorship-resistant money, which leads to applications in traditionally underserved industries. Independent journalist Ben Swann came back after a year of censorship thanks to an exclusive sponsorship with Dash. Dash point-of-sale and business solution Alt Thirty Six aims to service the legal cannabis industry, which at present is cash-only due to banking restrictions. Finally, Dash is taking off in Venezuela, which has experienced currency issues and regulatory barriers, with over a hundred businesses accepting it for payments as of time of writing.

The firearms industry would be wise to explore Dash for payments seeing present trends of hostility from banks.

MailChimp Bans Cryptocurrency Ads

(Dash Force News) MailChimp joins Google, Facebook and Twitter in banning cryptocurrency related advertising on their platform.

The mass email marketing manager, MailChimp, announced on March 29 that they intend to ban any “businesses involved in any aspect of the sale, transaction, exchange, storage, marketing or production of cryptocurrencies, virtual currencies, and any digital assets related to an Initial Coin Offering.” The company quickly received backlash from users and the online community blaming MailChimp for censorship. MailChimp defended its position saying they needed to prevent “scams, fraud, phishing, and potentially misleading business practices” from being facilitated through their platform.

However, MailChimp said that they will not ban all cryptocurrency related information and that “as long as the sender isn’t involved in the production, sale, exchange, storage, or marketing of cryptocurrencies”, emails can still be sent. MailChimp elaborated that this includes discussion of cryptocurrencies by journalists and publications, but did not elaborate further on how the platform intends to differentiate between the two.

Difference between malicious and beneficial marketing

Since MailChimp did not elaborate on how they plan to detect whether cryptocurrency mass emails are only discussion vs. benefit the sender from cryptocurrency adoption, it is important to discuss that very fine line. A journalist discussing cryptocurrency vs. marketing cryptocurrency can often overlap since many within the cryptocurrency space advocate for larger cryptocurrency adoption, so they can benefit from the advantages that come with a growing economy of scale. Many crypto advocates and groups want to see more merchant and user adoption of certain coins, but also do not participate in “scams, frauds, phishing, or misleading business practices”. Thus, it can be seen how MailChimp’s new policy is a very loose structure that can be used as an excuse to ban many accounts that are not necessarily malicious.

Watch Related:


It should also be noted that MailChimp’s ban goes a step further than the bans implemented by Google, Facebook, and Twitter since many advertisements are unsolicited and appear simply by using those platforms. However, emails sent via MailChimp are email subscriptions that must be voluntarily signed up for and must include an opt-out feature as required by CAN-SPAM laws. So even if it is assumed that ads are involuntarily harming consumers, it is much harder to make that assumption for MailChimp emails since they are voluntarily opted-into and users can opt-out at any time.

Marketing is sometimes misconstrued as only being needed if a product is inferior on its own or a scam. However, this is not the universal case since many quality products throughout the modern economy advertise to raise awareness to the larger population. In fact, it can be argued that a complicated marketing strategy signals a quality product because it has a complex team confidently behind a sophisticated product to organize the marketing strategy. Conversely, products that are scams typically do not put much effort into advertising since detailed advertising of its attributes could reveal its faults as a scam.

Cryptocurrency marketing is getting harder, which places Dash in an advantageous position

The increasing bans on cryptocurrency advertising is placing more of the onus on coordinated and sophisticated marketing efforts since the lowest hanging fruit of online advertising (Google, Facebook, Twitter, MailChimp) are being eliminated. Now advertisements need to go through sponsorships, individual advertisement arrangements with websites/conferences/brick and mortar stores, or teams spreading the word on the ground. This is becoming a battleground that favors Dash with its governance and treasury system.

Dash’s treasury fund and governance system allows coordinated large sponsorship deals with individuals and conferences along with organizing an even larger promotional strategy. Dash sponsors MMA fighters (Rory McDonald and Davis Dos Santos), sports teams like the Dash Leopards and Dash Aerosports, independent journalist Ben Swann, and partners with numerous cryptocurrency companies. Dash is able to organize its own conferences as well as sponsor even larger events such as this year’s Porcfest. These marketing campaigns require a complex organization and large funding that is unachievable for many coins, which puts Dash at an advantage during the cryptocurrency advertising bans as well as demonstrates the authenticity and sophistication of Dash.


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Bill Gates Dislikes Cryptocurrencies for “Their Anonymity”

Watch Ben Swann explain cryptocurrencies:

(Dash Force News) Bill Gates, Microsoft founder and famed philanthropist, said in a reddit AMA that “the main feature of crypto currencies is their anonymity” and he “doesn’t think this is a good thing.”

Gates further elaborated on the question asked by Askur1337 that “crypto currencies are used for buying fentanyl and other drugs” and accused the technology of causing “deaths in a fairly direct way.” Gates also praised the government’s ability to “find money laundering and tax evasion and terrorist funding.” Gates was also concerned about how the “speculative wave around ICOs and crypto currencies is super risky for those who go long”.

Bill’s accusations seem to ignore some key data points and ignores a significant reason for the recent expansion of cryptocurrencies.

Using scapegoats to take away privacy

Americans spent $109 billion USD on drugs in 2010 when Bitcoin was only a year old and still in limited circulation. They also spent $108 billion USD on drugs in 2000 before cryptocurrencies even existed in their current form. This should indicate to Bill Gates that Americans have been buying drugs and will continue to buy drugs regardless of the type of currency. Blaming crypto is only focusing on an effect of a larger drug abuse problem and is not a significant cause for the rise of crypto.

Europol recently announced the same concerns as Gates that crypto is being used by criminals to dodge law enforcement. However, a new study points to the fact that less than 1% of Bitcoin transactions are used in illegal transactions. Both also fail to mention that an estimated $800 billion – $2 Trillion USD are laundered each year in traditional fiat currencies, not to mention the amount of fiat that is simply exchanged in criminal acts. Once again blaming crypto for the actions of criminals ignores a larger problem and is not a significant cause for the surge of crypto.

The concerns around the volatility of ICOs and crypto ignores that volatility has been decreasing in some areas. Concerns for consumer protections from crypto volatility also focuses on an effect, not a cause, of low interest rates that distort consumer and investor behavior. Volatility is not the only reason for the growth of crypto.

These common arguments against crypto focuses on faux problems and ignores one of the larger reasons for the expansion of crypto; consumers want greater privacy in its own sake in any and every way possible. The fear-mongering of drugs, money laundering, consumer protections, tax evasion, terrorists, and other illegal activities have been the boogiemen and scapegoats for ever decreasing privacy of citizens by their government. Each year, worldwideand in the USA, more people die from natural causes, tobacco, automobile accidents, and even suicide than from drugs or terrorist attacks. Crypto and the host of other emerging encryption services demonstrate that consumers are seeking out better privacy services. It cannot be said exactly why consumers want more privacy since everyone has their own motivations, but the points made above demonstrate that the common arguments against crypto can be easily countered.

Dash’s focus is entirely on legitimate activities

While still offering unbeaten privacy, Dash has shifted its focus to the general consumer, utilizing fast and cheap transactions to create an attractive general purpose money. Additionally, the upcoming Evolution platform will allow for an easy and intuitive interface protocol-level, so that even the least technical of users should not be challenged using the platform. While any technology can be repurposed for illicit activities, Dash’s focus is far from this target market.

Written by Justin Szilard

Japan Central Bank: Cryptocurrencies Are Not Competition

(DFN) Recently, Haruhiko Kuroda, the Governor of the Bank of Japan called cryptocurrencies “crypto-assets” and said that “cryptocurrencies are not a threat to the Yen and he doesn’t see them as a danger to existing legal tenders anytime soon,” as crypto-lines reports. However, central bankers have various and conflicting opinions on the issue, leaving potential investors across the world without clear guidance as to a future consensus on the issue.

At present, cryptocurrency retains an aspect of volatility, as noted by Kuroda’s and other central bankers. However, that may change as the ecosystem matures. As cryptocurrency’s practiical use for everyday commerce and other regular, transactional uses, the amount of speculation and volatility involved in its use cases decreases. At this stage, cryptocurrency could become perceived as a competitive threat to national fiat currencies.

Fiat currency’s adoption lead, once eroded, could lead to a cryptocurrency “flippening”

National currencies, administered by central banks, compete on a world stage constantly being traded to buy goods and services and being bought and sold by speculators, with the currency that has the most value to be bought and having the most stable future growth path dominating the marketplace. As volatility decreases with growth, cryptocurrency could join this stage as well. While providing new currency options that can be traded for goods and services, cryptocurrency would not be subject to the interest rate and money supply manipulation of national fiat currencies. Governments would no longer have monopoly powers of the currency their citizens use, and may fear mass exodus from these currencies to forms that are more transparent and less inflationary. This could force their interest rate,s and therefore debt, to balloon, presenting an even more stark comparison between fiat currency and cryptocurrency.

While there may be some ways to go before cryptocurrency viability as currency is acheived, this path has already been set in motion. Despite Haruhiko Kuroda’s comments, Japan stands as one of the most crypto-friendly nations in the world, with a growing number of businesses accepting Bitcoin and other coins for payment. DiscoverDash lists 682 businesses and growing that accept Dash, with rapid progress in areas of the world experiencing currency issues, such as Venezuela, which alone contains over 80 Dash-accepting businesses. The public release of the Alt Thirty Six platform may see an even more rapid growth, with thousands of marijuana dispensaries poised to accept Dash payments through the platform.

Dash’s competitive advantage in addressing volatility

Dash stands as one of the cryptocurrencies with the best chances at reaching wide adoption as a currency due to its higher network capacity and low transaction fees, in addition to its clear and stable plan for long-term growth. In addition, Dash continues to add partners and users all around the world at a rapid pace. Altogether, this potentially makes Dash one of the least volatile cryptocurrencies moving into the future, and thus one of the best positioned to compete on the national currency stage. This could provoke a change in perspective from central bankers, which may cause a reevaluation of the position that cryptocurrency is not competition, which may bring up fresh regulatory discussions on the issue in the future.


Written by: Justin Szilard

FEE: Krugman Is Clueless About Bitcoin

By Max Borders 

In this video clip, Paul Krugman demonstrates once again that prizes don’t make you an expert on everything. Indeed, his poor prognostications happen so frequently that one wonders if Krugman is an expert on anything. I don’t say that to be unpleasant. If you’re going on TV and enjoying a lavish lifestyle by pretending to know what you’re talking about, shouldn’t you be held to a higher standard?

Let’s pass over for a moment how woefully wrong Krugman was about the Internet. What about the internet of money?

Krugman first says: “At this point bitcoin is not looking too good.”

It is true that investment often follows the Gartner hype cycle. So bitcoin has indeed fallen from great heights and is probably just now making its ascent out of the “trough of disillusionment.”

trough of disillusionment
Image FEE.org

But so what? There is nothing inherently wrong with bitcoin. In fact, some very savvy, patient people are building an unbelievable set of technologies within and around the blockchain. And if you believe Gartner, most really interesting tech goes through this cycle.

Let’s look back at the Internet. When the dotcom bubble and subsequent burst looked like this:

Bitcoin Chart
Image FEE.org

Do we conclude that because in 2002 the Internet wasn’t “looking so good” that TCP/IP was not viable? That would have been a very short-sighted thing to say, particularly about a system that is a robust “dumb network“ like the internet.

Bitcoin is also a dumb network. But don’t let the “dumb” part fool you, says bitcoin expert Andreas Andronopoulos. “So the dumb network becomes a platform for independent innovation, without permission, at the edge. The result is an incredible range of innovations, carried out at an even more incredible pace. People interested in even the tiniest of niche applications can create them on the edge.”

Then Krugman goes on to ask, “Why does a piece of paper with a dead president on it have value?” Answering his own question he says “Because other people think it has value.”

And this is not untrue. But the problem with this line of thinking is — subjective value notwithstanding — the value of money is also contingent. You might say the value of fiat money is too contingent — especially upon political whims, upon the limited knowledge of the folks at the Federal Reserve, and upon the fact that its unit of account is no longer anything scarce, such as gold.

By contrast, bitcoin has standard of scarcity programmed into it. So, bitcoin is in limited supply, thanks to a sophisticated algorithm.

In a fully decentralized monetary system, there is no central authority that regulates the monetary base. Instead, currency is created by the nodes of a peer-to-peer network. The bitcoin generation algorithm defines, in advance, how currency can be created and at what rate. Any currency that is generated by a malicious user that does not follow the rules will be rejected by the network and thus is worthless. (To learn more about this algorithm, visit “Currency with a Finite Supply.”)

Perhaps you don’t trust this algorithm. Certainly Paul Krugman does not. That’s okay, because digital currencies compete, so you can find one you do trust. One crypto currency is backed by gold and funnily enough, it’s called “the Hayek” after the Nobel laureate who wrote about competing private currencies.

Now, what shall we make of the magic of the dollar? Krugman says it is “the fact that you can use it to pay taxes.” That’s sort of like saying that the Internet works because of eFile. Let’s just assume Krugman was kidding.

But Krugman thinks, without irony, that bitcoin “levitates.” That is to say, he’s okay with the idea that the dollar has value because other people value it, but he’s not okay with the idea that bitcoin has value because other people value it, which is a rather curious thing to say in the same two-minute stretch. He goes on to argue that bitcoin is built on libertarian ideology, and that it doesn’t do anything that digitizing the dollar hasn’t done.

And that’s when we realize that Krugman doesn’t have any earthly clue about bitcoin.

But Freeman columnist Andreas Antonopoulos does:

Open-source currencies have another layer that multiplies these underlying effects: the currency itself. Not only is the investment in infrastructure and innovation shared by all, but the shared benefit may also manifest in increased value for the common currency.

Currency is the quintessential shared good, because its value correlates strongly to the economic activity that it enables. In simple terms, a currency is valuable because many people use it, and the more who use it, the more valuable it becomes.

Unlike national currencies, which are generally restricted to use within a country’s borders, digital currencies like bitcoin are global and can therefore be readily adopted and used by almost any user who is part of the networked global society.

What Krugman also fails to appreciate is that bitcoin and the bitcoin network is disintermediated. That’s a fancy way of saying it’s direct and peer-to-peer. This elimination of the mediating institutions — banks, governments, and credit card companies — means bitcoin transactions are far, far cheaper. But that also means these institutions could be far less powerful over time. And that’s precisely why it’s being adopted most quickly by the world’s poorest people and countries with hyperinflation.

Hey, look, I understand. In many ways, Krugman is a twentieth-century mind. Keynesian. Unhealthy obsession with aggregates and dirigisme. He believes in big central solutions to problems that robust, decentralized systems are far better equipped to tackle. And he’s not terribly plugged into tech innovation. In fact, here’s that well-played Internet quote in case you forgot:

The growth of the Internet will slow drastically, as the flaw in “Metcalfe’s law” — which states that the number of potential connections in a network is proportional to the square of the number of participants — becomes apparent: most people have nothing to say to each other!

By 2005 or so, it will become clear that the Internet’s impact on the economy has been no greater than the fax machine’s.

To grok the power decentralization, you have to have a twenty-first century mind.



Reprinted from FEE with permission under Creative Commons Attribution License

CA Governor Jerry Brown Signs Bitcoin Legalization Bill

In recent years, digital cryptocurrencies have emerged as a popular financial instrument and alternative to cash. Users appreciate them for their anonymity and independence from the moody whims of central bankers. Despite operating in a legal gray area due to the fact that previous laws and regulations couldn’t have envisioned the peer-to-peer technology behind many digital currencies, their use is widespread. Mainstream companies like Dish Network, Overstock.com, and TigerDirect allow customers to purchase products in bitcoin. Apple recently gave the nod to developers who want to create apps that accept bitcoin payments, and Yahoo, Bloomberg, and Google Finance have added tickers tracking its price movements.

However, despite mainstream acceptance of digital currencies, a California law dating back decades technically banned their use. In May of 2013, the California Department of Financial Institutions sent a cease-and-desist order to the Bitcoin Foundation, a conflict that Sacramento Democratic Assemblyman Roger Dickinson sought to resolve with AB 129, a bill that repeals a section of California’s corporate code banning private companies from issuing private currencies into circulation. On Saturday, California Governor Jerry Brown signed the bill into law, thus formally legalizing the use of bitcoin and other digital currencies.

Also at issue were proprietary payment methods like Amazon Coins and Starbucks Stars. Under the legal environment that existed prior to this rule change, such customer loyalty programs could have also been found in violation of the state’s outdated corporate code. California Governor Jerry Brown’s signing of AB 129 provides clarity on the use of digital currencies and represents the first time a US state has legally recognized bitcoin. Assemblyman Roger Dickinson told the Los Angeles Times that his bill was aimed at recognizing something that was already taking place.

The bill passed amid a weekend signing spree which included the repeal of a regulation requiring restaurant workers to wear gloves when handling ready-to-eat food items and modifications to truancy laws in an effort to cut back on the jailing of students for skipping school.

Bitcoin on the Rise Again, Can Increase Be Predicted?

The crypto currency Bitcoin has often been criticized for having a price that is closely linked with speculation. Critics claim Bitcoin lacks the necessary fundamental factors that would explain its tremendous rise in price, from $5 per Bitcoin in 2011, to $660 today.

Ladislav Kristoufek, from Charles University, recently conducted a study that explained the accuracy of the claims of both Bitcoin supporters and detractors, regarding what influenced its price.

Kristoufek found that the thorough transparency of Bitcoin transactions and the publication of the total number of Bitcoins in circulation on a daily basis, made the data much easier to follow than conventional currencies, such as the United States dollar.

It is completely unrealistic to know the total amount of the US dollars in the worldwide economy on a daily basis. However, Bitcoin provides such information on a daily basis, publicly and freely,” explained Kristoufek.

Kristoufek used a method called “wavelet coherence analysis,” where he looked for correlations between the price of Bitcoin and the price of other currencies.

Kristoufek’s study resulted in many answers, some of which, not everyone wanted to hear. He did not find many signs showing a relationship between Bitcoin and gold price movements, which brought on a great sense of doubt among those who believe Bitcoin can act as a “safe haven” during times of economic strain.

“We found no signs of Bitcoin being a safe haven,” concluded Kristoufek. “Apart from the Cypriot crisis, there are no longer-term time intervals where the correlations are both statistically significant and reliable.

Kristoufek also found that while there has been a great deal of speculation concerning the rising price of Bitcoin, there are fundamental factors that explain the increase.

A few fundamental factors discovered in Kristoufek’s study, were Bitcoin’s usage in trade, money supply and price level. As City A.M. writer Guy Bentley explained, “As the price of Bitcoin rises, incentives are created for users to become miners and gain a profit, impacting the price. The areas where speculation has been the principle driver of Bitcoin’s price are during episodes of explosive prices. The interest in the crypto currency drives the price up and during steep declines pushes it down.”